S&P500 Closes at a New 52-Week Low, Big Board Volume Down

The S&P500 closed in new lows for the year Wednesday, following the lead of
cumulative TICKscore, which has been warning of such a move since it violated
its March lows three weeks ago.

Noteworthy that we saw far fewer issues hit new 52-week lows Wednesday – only
404 vs. 652 on Tuesday. Not as many stocks were breaking down along with the
S&P, a positive divergence.

Also noteworthy that the S&P500 posted both a higher high and higher low. It’s
unusual to see the S&P post higher highs and higher lows when breadth closes
better than 2:1 negative (as it did Wednesday). In fact it’s only happened
nine other times since 1990, all of which are noted below…

SPX Higher High & Higher Low Despite 2:1 Neg Breadth
07/02/08… S&P500 ??? three sessions later
03/19/08… S&P500 +4.2% three sessions later
02/21/08… S&P500 +2.9% three sessions later
07/16/07… S&P500 +0.2% three sessions later
07/20/06… S&P500 +1.6% three sessions later
10/26/05… S&P500 +1.3% three sessions later
10/20/05… S&P500 +1.6% three sessions later
10/02/02… S&P500 -5.2% three sessions later
08/06/99… S&P500 +0.1% three sessions later
09/09/98… S&P500 +2.3% three sessions later

NYSE volume was light considering the S&P’s afternoon plunge into new lows, a
positive development from an intermediate-term perspective. The last thirty
times that the S&P closed at a new 52-week low and big board volume declined
from the previous session are noted in the table below, along with the S&P’s
performance over the next two weeks. Note that in 27 cases, or 90% of the
time, the new 52-week low ended up leading to higher prices two weeks later…

SPX Closes at New 52-week Low, NYSE Volume Down
07/02/08… S&P ??? two weeks later
03/10/08… S&P +6.3% two weeks later
03/06/08… S&P +1.9% two weeks later
10/09/02… S&P +15.4% two weeks later
10/07/02… S&P +14.6% two weeks later
07/22/02… S&P +1.8% two weeks later
07/18/02… S&P +0.4% two weeks later
07/16/02… S&P +0.2% two weeks later
09/20/01… S&P +8.6% two weeks later
09/18/01… S&P +1.8% two weeks later
03/09/01… S&P -7.6% two weeks later
02/23/01… S&P -1.0% two weeks later
11/22/00… S&P +1.6% two weeks later
09/24/90… S&P +2.9% two weeks later
08/22/90… S&P +1.2% two weeks later
12/04/87… S&P +11.3% two weeks later
07/24/84… S&P +10.1% two weeks later
07/23/84… S&P +9.2% two weeks later
05/29/84… S&P +1.3% two weeks later
05/23/84… S&P +1.2% two weeks later
08/11/82… S&P +14.6% two weeks later
08/10/82… S&P +12.2% two weeks later
08/06/82… S&P +9.0% two weeks later
08/04/82… S&P +2.3% two weeks later
07/30/82… S&P -3.0% two weeks later
06/21/82… S&P +0.1% two weeks later
03/08/82… S&P +5.1% two weeks later
03/05/82… S&P +1.2% two weeks later
09/24/81… S&P +6.4% two weeks later
09/18/81… S&P +2.7% two weeks later
03/06/78… S&P +4.5% two weeks later

Also, just a quick word on the headlines proclaiming ‘official bear market!’
because the market averages are off 20% from their highs. Who came up with
this? And why is it so widely quoted? Pull up a fifty-year chart of the Dow or
S&P and mark those times when the index was down 20% from the last major top.
You’ll find that far from being a harbinger of bad things to come, it’s
usually proved to be a buying opportunity looking out one year. Not saying
that’s the case this time (although I do think we’re forming an intermediate-
term low here), but the implication that a 20% decline ushers in a period of
long-term weakness is just untrue.

With the media constantly throwing around that 20% figure, I’m reminded of a
quote I copied down from Brett Steenbarger’s April 14th column over at
Traderfeed… “there have only been 78 days in the entire period from 1960-
present in which $SPX has been more than 20% below its 200-day moving average.
The market finished stronger 200-days later on 76 of those 78 occasions.”
That’s the kind of useful, actionable research that the mainstream media
should be reporting as it can actually help investors, rather than this
‘official bear market’ garbage. Incidentally, as of Friday’s close the S&P is
now trading 10% below its 200-day average.

Categories : Archived EOD Commentary, End-of-Day Commentary

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